Pre-seed is the round you raise before you have much to show: maybe a working prototype, a few early users, a co-founder and a strong sense of where the market is going. In the UK most pre-seed rounds land between £50,000 and £500,000, and the cheque usually comes from angel investors, friends, family and a small number of early-stage funds rather than the big venture firms you read about. The UK has one of the most generous tax environments in the world for backing companies at this stage, and if you set the round up correctly you make yourself far easier to invest in.
This guide walks through the process the way a London founder would actually run it: getting investment-ready, using SEIS and EIS properly, choosing the right legal instrument, working out a sensible valuation and finding people who write cheques. For more on the London startup scene, see the Idea London homepage.
What pre-seed funding actually is
Pre-seed sits before your seed round. At seed you are usually proving you can grow; at pre-seed you are proving the idea is worth pursuing at all. Investors here are buying into the team and the problem far more than the numbers, because there are rarely many yet.
That changes what you need to raise. You do not need a financial model showing three years of profit. You do need a clear story: who has this problem, why it matters, why you are the people to solve it, and what the money will let you prove in the next 12 to 18 months. Be specific about the milestones it funds, such as a launched product or a paying pilot.
Get SEIS and EIS working for you
Two government schemes do more to get early UK startups funded than almost anything else, and you should understand them before you speak to an investor.
The Seed Enterprise Investment Scheme (SEIS) is built for exactly your stage. It gives individual investors 50% income tax relief on what they put in, up to £200,000 per tax year. From the company side, you can raise a maximum of £250,000 through SEIS in total. To qualify, your company must have fewer than 25 full-time equivalent employees, gross assets of no more than £350,000 when the shares are issued, and it must not have been carrying out its qualifying trade for more than three years. The full conditions are set out by the British Business Bank in its guide to the Seed Enterprise Investment Scheme.
The Enterprise Investment Scheme (EIS) picks up where SEIS leaves off. It offers 30% income tax relief and far higher limits, so it tends to come into play once you have used your SEIS allowance. Many UK angels expect SEIS or EIS eligibility as standard, so offering it widens your pool of backers.
The takeaway: structure your round so investors can claim relief. A higher-rate taxpayer putting in £20,000 under SEIS could cut their tax bill by £10,000, which changes how they weigh an early-stage bet.
Apply for HMRC advance assurance
Advance assurance is HMRC telling you, before you raise, that your share issue is likely to qualify for SEIS or EIS relief. It is not legally required, but in practice it is close to essential, because serious angels ask for it before they commit.
To apply you submit details of your company, your business plan or pitch deck, your latest accounts if you have them, and ideally the names of interested investors. HMRC aims to respond within a few weeks, though it can take longer at busy times, so apply well before you want money in the bank.
One trap to avoid: HMRC expects any SEIS or EIS qualifying instrument to convert into shares within six months. An open-ended arrangement with no clear conversion date will not get approved, which leads directly to which instrument you use.
Choose the right funding instrument
How you take the money matters as much as how much, and this is where founders who copy US templates get caught out. A priced equity round means you agree a valuation now and issue shares at that price. It is clean and SEIS friendly, but it forces a valuation early.
An Advance Subscription Agreement (ASA) lets investors pay now and receive shares later, usually at your next round with a discount. A properly drafted ASA can qualify for SEIS and EIS relief, which is why it has become a standard UK way to raise quickly before a full round. SeedLegals popularised a version called a SeedFAST.
A US-style SAFE (Simple Agreement for Future Equity) is common in America but does not issue shares immediately and does not qualify for SEIS or EIS, so your UK investors lose the tax relief that makes the bet attractive. Convertible loan notes are structured as debt and also fall outside SEIS and EIS, so they suit later or larger raises.
For most UK pre-seed founders the realistic choice is a priced SEIS round or an SEIS-eligible ASA. Take legal advice before you sign, because small drafting errors can void the relief.
Set a defensible valuation
At pre-seed there is no formula that produces the “right” number. Valuation is really a negotiation about how much of your company you are willing to give away for the money you need. A common pattern is selling somewhere around 10% to 20% of the business at this stage, though it varies widely.
Work backwards. Decide how much you genuinely need to hit your next milestones, then decide what percentage you are comfortable selling, and the valuation falls out of that. Push it too high and you risk a painful down round later; set it too low and you give away too much before you have any negotiating power.
Build the materials investors expect
You do not need much, but what you have should be sharp. At minimum:
- A pitch deck of roughly 10 to 15 slides covering the problem, your solution, the market, traction, the team, the amount you are raising and what it will achieve.
- A short financial forecast. Nobody believes pre-seed projections to the penny, but they show you understand your costs and your route to revenue.
- A clear statement of SEIS and EIS eligibility, including whether you hold advance assurance.
- A simple cap table showing who currently owns what.
The team slide carries more weight than founders expect. Investors are backing people, so make the case for why this team beats the problem.
Find and approach investors
UK pre-seed money tends to come from a handful of sources, and a real round usually combines several. Angel investors are individuals, often former founders or operators, investing their own money. Angel networks and syndicates across London and the wider UK pool angels together, and many look specifically for SEIS-eligible deals. Warm introductions consistently beat cold outreach, so map who in your network can connect you.
Friends and family fund a large share of pre-seed rounds. If you go this route, treat it formally: issue proper shares, document the terms, and make sure everyone understands they could lose their money. SEIS relief can apply here too.
Early-stage VC funds increasingly write small pre-seed cheques, though competition is fierce. Research which funds back your sector and stage before you reach out.
Grants and loans can extend your runway alongside equity. Innovate UK, the national innovation agency, funds research and development projects through its Innovation Funding Service, though competitions open and close throughout the year, so check what is currently live. The British Business Bank’s Start Up Loan offers eligible founders a personal government-backed loan of between £500 and £25,000 with 12 months of free mentoring; from 6 April 2026 new loans carry a fixed interest rate of 7.5%. Because it is unsecured debt rather than equity, it does not dilute you.
Run the round and close cleanly
Once you have interest, momentum matters. Set a target and a rough timeline, and let investors know others are looking, because a round that feels like it is filling up closes faster than one that feels stuck. Then agree terms, get the documents reviewed and issue the shares.
After the shares are issued you must submit a compliance statement to HMRC so your investors can claim their SEIS or EIS relief. Do this promptly: your investors are relying on it, and a delay is the fastest way to sour a relationship you will want again at seed.
Pre-seed is rarely smooth, and hearing no is part of the process. Founders who succeed treat fundraising as a campaign rather than a single ask, use the UK schemes built to help them, and keep going until the round is full.
Frequently asked questions
How much can a UK startup raise at pre-seed?
Most UK pre-seed rounds fall between £50,000 and £500,000, though some founders raise as little as £25,000 from friends and family while others go higher. Through SEIS specifically a company can raise a maximum of £250,000 in total, so larger rounds often combine SEIS with EIS or other sources.
What is the difference between SEIS and EIS?
SEIS is aimed at the earliest stage and gives investors 50% income tax relief, with a company cap of £250,000 and tight limits on size and trading age. EIS is for slightly later or larger raises, offering 30% relief with much higher limits. Many founders use their full SEIS allowance first, then move to EIS.
Do I need HMRC advance assurance before raising?
It is not legally required, but most serious angels expect it because it signals your round is likely to qualify for SEIS or EIS relief. HMRC aims to respond within a few weeks, so apply well before you want money in the bank.
Can I use a US-style SAFE to raise in the UK?
You can, but it is usually a mistake at pre-seed. A SAFE does not issue shares immediately and does not qualify for SEIS or EIS, so your investors lose the tax relief that makes early UK investment attractive. An SEIS-eligible Advance Subscription Agreement or a priced equity round is the more common UK route.
How much equity should I give away at pre-seed?
There is no fixed answer, but selling somewhere around 10% to 20% is a common pattern. Work out how much you actually need to hit your next milestones, decide what share you are comfortable selling, and let the valuation follow from that rather than fixing a headline number first.
What can I use pre-seed money for?
Pre-seed capital buys time to prove the idea works. Typical uses include building a first product, running early pilots, making initial hires and reaching a defined level of usage or revenue. Investors will want to see specific milestones the money funds, not a vague plan to “grow”.